There are four main sources of tax revenue in the United States. They are income tax, payroll tax, corporate tax, and “other” taxes. These taxes are collected by the Internal Revenue Service, or the IRS, which is a branch of the US Department of Treasury. The revenue generated from these taxes is used to fund government programs, both discretionary and mandatory.
Income tax is a tax on the income from an individual. This makes up the majority of the tax revenue generated. It is labelled as a progressive tax because as more income is generated, more taxes are paid. This means that individuals or families with higher incomes will pay a larger share.
The second largest portion of tax revenue comes from payroll taxes. Payroll taxes are the taxes taken from an individual’s paycheck. This type of tax is supposed to be split between both the employer and the employee. This includes things like Social Security, Medicare, and insurance. Payroll taxes are considered regressive because of the payroll tax cap that is in place for these programs.
Corporate tax is the same as income tax, except instead of an individual paying the tax it is a corporation. Other than the source, this tax is fundamentally the same, although it generates only a fraction of the revenue that individual income tax does. The tax is applied to the net profits for corporations operating in the country.
Finally, other tax sources estate taxes, excise taxes, and miscellaneous taxes. Estate taxes are reserved for assets, like real estate or stock. Excise tax is a form a sales tax used for things like gasoline, tobacco products, or alcohol. These taxes can be used to encourage people to avoid using these products while still generating re...
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"Center on Budget and Policy Priorities." Policy Basics: Where Do Federal Tax Revenues Come From? —. N.p., n.d. Web. 20 Apr. 2014.
"Federal Reserve Bank of San Francisco." SF Fed. N.p., n.d. Web. 20 Apr. 2014. < http://www.frbsf.org/education/publications/doctor-econ/2003/january/monetary-policy-1970s-1980s>
"Historical Highlights of the IRS." Historical Highlights of the IRS. Internal Revenue Service, 12 Feb. 2014. Web. 21 Mar. 2014.
"Almanac of Policy Issues." History of the US Tax System. U.S. Department of the Treasury, Aug. 2013. Web. 21 Mar. 2014.
"Congressional Budget Office." The Budget and Economic Outlook: 2014 to 2024. N.p., n.d. Web. 20 Apr. 2014. < http://cbo.gov/publication/45010>
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